Making Tax Digital: What You Need To Know

First announced in the 2015 Spring Budget, Making Tax Digital is a big step forward. It encourages the storing of digital business records and reduces the need for painstaking paper trails. This is something that’s particularly prevalent in the modern climate. You can also send Income Tax updates – online – direct to HMRC. What’s more, with MTD, live updates have replaced the filing of longwinded, Self-Assessment tax returns.

WHAT IS MAKING TAX DIGITAL?

Making Tax Digital is a key component of the Government’s long-term plan to help people and businesses remain on top of their tax affairs. HMRC’s aim is to:

• Reduce mistakes
• Combat non-compliance
• Help people streamline their tax affairs by introducing digital record-keeping

HMRC want to become a global leader in ‘digitally advanced tax administration’. According to the lawmakers, MTD is ‘making fundamental changes to the way the tax system works’. It is ‘transforming tax administration’ to become:

• More effective
• More efficient
• Easier for people to get their tax right first time

WHAT’S THE PURPOSE OF MAKING TAX DIGITAL?

The ultimate goal is for business owners, landlords, and the self-employed to have their own digital tax accounts with everything stored in one place. The hope is to make tax affairs more simple and more streamlined.

Another ambition for HMRC is to tackle cases of non-compliance. Recent figures revealed that avoidable errors relating to tax returns tend to cost the Exchequer over £9billion each year. The precision and straightforwardness associated with digital records should reduce the money lost to such mistakes. Particularly when combined with the fact that HMRC receive information direct from said records.

HOW DOES MAKING TAX DIGITAL WORK?

• As of April 2019, all businesses with a taxable turnover above £85,000 – the current threshold for VAT – are now expected to keep digital VAT records.


• Figures need reporting to HMRC once every quarter.


• Small-to-medium-sized businesses which fall below this threshold are not obliged to do this until 2020 at the earliest.


• HMRC insist that they’ve consulted with stakeholders throughout the developmental process.


• In March 2019, the Government announced that their focus will be on ‘supporting businesses to transition’. This means that Making Tax Digital will not get mandated for any new taxes or businesses in 2020.


• Self-employed businesses can volunteer to use the software NOW.

CAN I BE EXEMPT FROM MAKING TAX DIGITAL?

Yes. If you’re exempt from submitting electronic VAT returns, you’re also exempt from Making Tax Digital for VAT.

This could be for reasons such as your religious beliefs being incompatible with the use of electronic communications. It also includes those who cannot make electronic returns due to their age, disability, or remoteness of location.

WHAT DOES MAKING TAX DIGITAL MEAN FOR ME?

By Making Tax Digital, records such as your business name and address, VAT registration number, and details of VAT accounting schemes, need to be kept digitally. You’re also required to store details of any supplies you make or receive.

Digital tools, such as online accounting software, are to be used for recording things like business income and expenditure. So, with all that in mind, it’s worth a quick call to your accountant. Check they’re using software which is compatible with the new system. And, make sure you’re ready to Make Tax Digital.

MAKING TAX DIGITAL FOR INCOME TAX

Are you a self-employed business or landlord? If so, you can volunteer to use certain software to digitally store business records and send Income Tax updates to HMRC. This would replace the filing of your Self-Assessment tax return. To find out more, click here.

SUPPORT FROM HMRC

HMRC provides digital guidance and support services to make the switch to MTD as straightforward as possible. This includes webinars and videos to help businesses and agencies send online VAT returns and Income Tax updates to HMRC.

It’s worth checking out HMRC’s ‘Stakeholder Communications Pack’. The contents of which can be used to inform key messages and communications activity for members, customers and clients.

HMRC have also published a VAT notice. This explains the rules surrounding Making Tax Digital for VAT. It also touches on the digital information that needs keeping.

WHAT TECHNOLOGY IS AVAILABLE FOR MAKING TAX DIGITAL?

At Danbro, we’re specialists in cloud-based accounting AND Making Tax Digital. We also provide free access to online accounting packages, such as FreeAgent and QuickBooks Online.

• QuickBooks Online work with almost 3.5 million companies worldwide.
• FreeAgent were recently voted the UK’s number one for small business accounting software.

Both platforms include an easy-to-use app. So, you can track your income and expenses straight from your smartphone. This helps businesses like yours record transactions on the go. And, because so many of our clients are already benefiting from this market-leading accountancy technology, the transition to Making Tax Digital with Danbro is swift, simple and straightforward.

MAKING TAX DIGITAL IS EASY WITH DANBRO

You can be forgiven if you’re not completely up-to-speed with Making Tax Digital. However, your accountant should certainly know their stuff when it comes to MTD!

As Neil Ormesher, Managing Director of Danbro Accounting, puts it: “We see the positives from Making Tax Digital.”

“Using digital tools can bring much more efficiency to a business,” he said. “More important, it gives business leaders timely information to help make those difficult decisions. We see this as a real opportunity to get your systems ready for the digital future.”

To check whether you’re ready for Making Tax Digital, or if you want to learn more about our accounting software, get in touch with our dedicated team today. You can also call us now on 01253 600 150 to find out what Danbro can do for you.